The latest Federal Reserve Beige Book provides an overview of current economic conditions across the United States. Highlights:
- Economic activity: The report indicates that economic activity has been largely flat across most regions since early September. This suggests a slowing in economic growth despite some positive indicators in employment, consumer prices, and retail sales.
- Employment: Employment levels saw a slight increase, with more than half of the Federal Reserve districts reporting slight or modest growth. The report notes a limited number of layoffs and low worker turnover across various regions.
- Regional variations: The Beige Book compiles qualitative data from the 12 Federal Reserve Districts, highlighting regional economic conditions and prospects. This information is gathered through reports from bank directors, interviews, and online questionnaires with businesses and community organizations.
Key points regarding agriculture:
- Farm income and crop prices: Prospects for farm income have declined due to falling corn and soybean prices. Despite favorable crop conditions in most areas, some regions experienced a shortage of precipitation. Farmers are holding higher-than-usual levels of crops in storage due to low prices.
- Harvest expectations: Fall harvests are expected to approach previous record levels, indicating strong production despite the challenges with prices.
- Livestock and other agricultural products: Livestock operations have benefited from lower feed costs. Cattle prices have eased but remain high compared to historical levels.
- Dairy and egg prices have increased, while hog prices have decreased slightly.
- Financial stresses: There is an expectation of increasing financial stress on less-productive farms due to the combination of low crop prices and high interest rates.
- The St. Louis Fed pointed out that low crop prices have helped livestock producers but have “failed to offset other price increases.” Inflation has continued to moderate, the report noted, with “prices of some food products, such as eggs and dairy, were reported to have increased more sharply,” while “many districts noted increasing price sensitivity among consumers.” The short-lived port strike on the East and Gulf Coasts had little lasting impact although some pickup in activity was noted ahead of the work stoppage. The Chicago Fed noted impacts for agriculture from rail issues with Mexico and low water on the Mississippi River.
Bottom line: The report overall should still support another reduction in the Fed funds rate of 25 basis points at the Nov. 6-7 monetary policy meeting, which is currently the overwhelming market expectation.